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    3 q12 presentation final 3 q12 presentation final Presentation Transcript

    • Third Quarter 2012 Financial Results Conference CallNovember 2, 2012
    • Forward-looking StatementsForward-looking StatementsCertain statements made in this presentation may constitute forward-looking statements, including, but not limited to, statementsregarding our expectations with respect to future growth and performance, the market potential for pipeline assets, the closing of theMedicis acquisition and the timing of related regulatory approvals, integration planning and expected revenue and synergies associatedwith the Medicis acquisition, the composition of the future Medicis management team, future cash returns with respect to acquisitions,expectations with respect to partnering rights and journal publication with respect to efinaconazole, expectations with respect to grossmargins, certain expenses and the collection of receivables, future debt amounts and ratios, and financial guidance for 2012, includingexpected revenues, adjusted cash flow from operations and cash EPS for 2012 and the fourth quarter of 2012. Forward-lookingstatements may generally be identified by the use of the words “anticipates,” “expects,” “intends,” “plans,” “could,” “should,” “would,”“may,” “will,” “believes,” “estimates,” “potential,” “targets,” or “continue” and variations or similar expressions. These statements arebased upon the current expectations and beliefs of management and are subject to certain risks and uncertainties that could causeactual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but arenot limited to, risks and uncertainties discussed in the Companys most recent annual or quarterly report filed with the Securities andExchange Commission and other risks and uncertainties detailed from time to time in the Companys filings with the SEC and theCanadian Securities Administrators, which factors are incorporated herein by reference. Readers are cautioned not to place unduereliance on any of these forward-looking statements. These forward-looking statements speak only as of the date hereof. The Companyundertakes no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of thispresentation or to reflect actual outcomes.Non-GAAP InformationTo supplement the financial measures prepared in accordance with generally accepted accounting principles (GAAP), the company usesnon-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, amortization of alliance productassets & pp&e step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, acquisition-related and other costs, acquired in-process research and development ("IPR&D"), legal settlements outside the ordinary course ofbusiness, the impact of currency fluctuations, amortization and other non-cash charges, amortization of deferred financing costs, debtdiscounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets held for sale/impairment, net,(gain) loss on investments, net, and adjusts tax expense to cash taxes. Management uses non-GAAP financial measures internally forstrategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures,management intends to provide investors with a meaningful, consistent comparison of the company’s core operating results and trendsfor the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP. Therefore, the information is notnecessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, thecorresponding measures calculated in accordance with GAAP. Note 1: The guidance in this presentation is only effective as of the date given, November 2, 2012, and will not be updated or affirmed unless and until the Company publicly announces updated or affirmed guidance. 1
    • Agenda 1. Third Quarter Results and Performance 2. Performance of Deals and Recent Events 3. Medicis and IPD-108 (efinaconazole) Updates 4. Financial Update 5. 2012 Guidance Update 2
    • Q3 Revenue and Earnings GrowthNo one-time items reported in Q3 2011 or Q3 2012 Q3 2012 Q3 2012 Q3 2011 vs Q3 2011 Total Revenue $884 M $601 M 47% Product Sales $857 M $570 M 50% Cash EPS $1.15 $0.66 74% 3
    • 2012 Organic Growth Same Store Sales* Q3 2012 2012 YTD U.S. Derm 62% 40% U.S. Neuro -1% -6% Canada / Australia -6% 4% Emerging Markets 8% 11% Total 14% 9% Pro Forma* Q3 2012 2012 YTD U.S. Derm 35% 30% U.S. Neuro -1% -6% Canada / Australia -5% 4% Emerging Markets 9% 13% Total 12% 11%* Adjusts for the impact of foreign exchange, acquisitions, divestitures/discontinuations, and includes JV revenues. 4
    • Price vs. Volume GrowthSeptember 2012 YTDAdjusts for the impact of acquisitions, divestitures/discontinuations,and includes JV revenues Price Volume U.S. Derm 8% 22% U.S. Neuro 5% -11% Canada/Australia -2% 6% Emerging Markets -1% 14% Total Company 3% 8% 5
    • Revenue Performance of Past Acquisitions LTM prior On Track or to close 2012 Forecast Ahead of Acquisition Date (USD $Ms) (USD $Ms) CAGR Deal Model Coria Oct-08 $28.6 $85.4 28% Yes Dow/Acanya Dec-08 $36.6 $90.3 23% Yes Aton May-10 $68.0 $129.1 26% Yes PharmaSwiss Mar-11 $221.3 $225.6 1% Yes Zovirax (US & Canada) Feb-11 $169.6 $258.9 29% Yes Elidel May-11 $43.1 $80.8 43% Yes Sanitas Aug-11 $120.0 $144.4 12% Yes Afexa Oct-11 $43.2 $30.3 -35% No Ortho Dec-11 $150.5 $150.2 0% Yes Dermik Dec-11 $242.1 $236.6 -2% Yes Inova Dec-11 $186.6 $205.7 10% Yes Total $1,309.7 $1,637.2 12%LTM prior to close as been adjusted to reflect 2012 foreign exchange ratesNote: Excludes deals under $75 million purchase price and transactions completed in 2012 6
    • Performance of Past AcquisitionsCash Flow vs. Deal Model Behind by More Ahead by More Than Acquisition Than 10% On Track 10% Coria P Dow/Acanya/111 P Aton P PharmaSwiss P Zovirax (US & Canada) P Elidel P Sanitas P Afexa P Ortho P Dermik P Inova P Total PNote: Excludes deals under $75 million purchase price and transactions completed in 2012 7
    • Acquisitions – Cash Payback(USD in millions) Cash Date Cash Generated Purchase Payback to Acquisition Acquired Since Close Price Date Coria Oct-08 $133 $95 1.40 Dow/Acanya Dec-08 $292 $400 0.73 Aton May-10 $192 $318 0.60 Biovail (incl. Zovirax) Sep-10 $1,538 $2,636 0.58 PharmaSwiss Mar-11 $98 $491 0.20 Elidel May-11 $97 $99 0.98 Sanitas Aug-11 $99 $448 0.22 Afexa Oct-11 $12 $92 0.13 Ortho Dec-11 $107 $346 0.31 Dermik Dec-11 $119 $421 0.28 Inova Dec-11 $86 $657 0.13Note: Excludes deals under $75 million purchase price and transactions completed in 2012 8
    • Medicis Update Medicis stockholder meeting scheduled for 12/7/12 HSR filed in September  Pulled and re-filed in October  Expect response by end of November Integration planning ahead of schedule  Highly collaborative process  Expect planning to be complete by end of November  Cost synergies now expected to significantly exceed $225 million New “Medicis” management team expected to consist of both Medicis and Valeant executives 9
    • Significant Business DevelopmentActivities Sales Company Acquired Assets Territories Revenue Purchase Multiple Price Paid Shower to Shower; U.S; Canada; Ambi; Caladryl; South East J&J* Purpose; Cortaid; Asia; Australia; ~$70 million $153 million 2.2X Corn Huskers; South Africa; Cortef Latin America Visudyne** U.S. Rights to U.S ~$21million $50.5 million 2.4X Visudyne Visudyne Non-U.S. Royalties ROW ~$14 million $50 million 3.6X on Visudyne* Not all products in every market** Also purchased $12 million for multiple years of Visudyne inventory (primarily API) 10
    • Efinaconazole (IDP-108) Update PDUFA date May 26, 2013 We now have worldwide rights  Except for Japan, China, Taiwan and South Korea  Plan to file in all territories where commercially viable  Looking for partners in territories we are not operating in Filed with Health Canada in October Kaken filed NDA in Japan in October Expect publication in leading dermatology journal by year end 2012 11
    • Financial UpdateHoward Schiller
    • Financial Summary Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012Product Sales $570M $654M $758M $749M $857MOngoing Service/Alliance Revenue $31M $34M $32M $26 M $27 MTotal Revenue excl. “one-timers” $601M $688M $790M $775M $884MOne-time items N/A N/A $66 M $45 M N/ATotal Revenue $601M $688M $856M $820M $884MCost of Goods Sold% (% of product sales) 28% 25% *25% 24% 23%SG&A% (% of total revenue) 21% 20% 19% 22% 20%R&D Expense $18M $17M $22M $18M $19MOperating Margin (% of total revenue)(excluding amortization) 50% 57% 55% 52% 54%Cash EPS (Reported) $0.66 $0.94 $1.14 $1.01 $1.15 w/o one-time items $0.66 $0.87 $0.91 $0.87 $1.15Adjusted Cash Flow fromOperations $208M $253M $322M $307M $241MFully Diluted Share Count 323 M 317 M 316 M 313 M 312 M* Q1 2012 COGS has been restated to show impact of contract mfg moved to Service/Alliance (previously stated at 26%) 13
    • Revenue & Cash EPS Trend Analysis Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12Reported Revenues ($M) $515 $565 $609 $601 $688 $856 $820 $884Sale Cloderm/5FU/IDP111 -$36 -$66Milestones -$40 -$45Revenue excl. one-time items ($M) $515 $529 $569 $601 $688 $790 $775 $884Revenue Growth (vs PY) 17% 15% 28% 34% 49% 36% 47%Reported Cash EPS $0.50 $0.62 $0.73 $0.66 $0.94 $1.14 $1.01 $1.15Sale Cloderm/5FU/IDP111 (margin) -$0.05 -$0.15Milestones -$0.12 -$0.14Gain on Cephalon Shares -$0.06One-time Fx Gains -$0.06 -$0.08Cash EPS excl. one-time items $0.50 $0.56 $0.54 $0.66 $0.87 $0.91 $0.87 $1.15Cash EPS Growth (vs Prior Year) 28% 17% 65% 75% 61% 61% 75%Base Business Cash Earnings ($M) $164 $188 $179 $212 $277 $287 $314 $357Cash Earnings / Revenue 32% 36% 31% 35% 40% 36% 41% 40%Cash Earnings / Revenue (LTM) 31% 32% 32% 34% 36% 36% 38% 39% 14
    • Cash Flow Q1 2012 Q2 2012 Q3 2012 YTD 2012 GAAP Cash Flow from $167.2 M $254.6 M $166.8 M $588.6 M Operations Adjusted Cash Flow $321.6 M $307.5 M $241.2 M $870.3 M from Operations Q3 GAAP Cash Flows impacted  Full Year Adjusted Cash Flow from by: Operations guidance reduced to  Restructuring and Integration $1.2 - $1.3 billion costs of $34.2 million which  Q4 Adjusted Cash Flow from decreased vs Q2 and Q1 Operations $330-$430 million  Payment of accrued legal  Lower Full Year Adjusted Cash Flow settlement costs of $37.7 million from Operations driven by:  Increased working capital of  Strong Emerging Markets Growth $127.9 million, including an  Working Capital investments in increase in A/R of $182.6 M due acquired businesses to:  Global plant consolidations and  Acceleration in top line growth related tech transfers  Strong September sales  Zovirax stock out early in Q3 15
    • Acquisition, Integration, & RestructuringCash Costs($ in millions) Q3 12 Q2 12 Q1 12 Acquisition Related Restructuring/Integration $ 25.0 $ 36.6 $ 59.5 Biovail Merger Related Costs $ 25.9 Manufacturing Rationalization $ 2.3 $ 10.6 $ 1.9 IP Migration $ 5.4 $ 1.1 U.S. Commercial Restructuring $ 1.6 Total $ 34.2 $ 48.3 $ 87.3 16
    • Update on Recent Financings Medicis Financing  7 year Term Loan B – to fund at close  $1.0 billion @ L+3.25 (1% LIBOR floor)  8 year High Yield Notes – closed into escrow  $1.75 billion @ 6 3/8% Other Financings  8 year High Yield Notes - not tied to Medicis deal  $500 million @ 6 3/8% Q4 2012 Impact  $35 million, or $0.12 Cash EPS, for Medicis related interest expense  $9 million, or $0.03 Cash EPS, for other financing Pro forma for Medicis closing  Total debt = $10.9 billion  Leverage ratio = ~4.2X 17
    • Financial Guidance for 2012 Previous Guidance Current Guidance Q4 2012 2012  Revenue $3.4 - $3.6 Revenue $900 M+ $3.4 - $3.6 B billion Cash EPS Excluding Medicis Related $1.30 - $1.35 $4.60 - $4.65  $4.55 - $4.75 Cash Financing EPS Cash EPS Including  $4.18 – $4.38 Medicis Related $1.18 - $1.23 $4.48 - $4.53 ex one-time Interest Expense items Cash EPS Excluding Medicis Related $1.30 - $1.35 $4.23 - $4.28  > $1.4 billion in Interest Expense & Adjusted Cash Flow One-time Items from Operations Adjusted Cash Flow from Operations $330 - $430 M $1.2 - 1.3 BSee Note 1 regarding guidance 18
    • Third Quarter 2012 Financial Results Conference CallNovember 2, 2012